Apple blames 17% drop in Mac sales on iMac supply constraints

Apple on Wednesday released its earnings for the first quarter of the 2013 fiscal year, revealing a precipitous drop in both revenue and shipments for Macs, a sector that once made up the core of the company's business.

For the quarter ended December 31, 2012, the Mac division moved 4.1 million units, generating $5.52 billion in revenue. That figure is down from 4.9 million units and $6.62 billion for the previous quarter, and 5.2 million units and $6.6 billion in revenue year-over-year.

Apple blamed iMac production difficulties in part for disappointing Mac sales.

Revenue from the Mac sector has continued to shrink as a proportion of Apple's overall revenue. Even as Apple's mobile offerings have thrived  CEO Tim Cook said today the company had sold more than half a billion iOS devices  the company's notebook and desktop segment have dropped to just 10.1 percent of overall revenue, compared to 18.4 percent for the previous quarter and 14.2 percent for the first quarter last year.

Apple's Chief Financial Officer Peter Oppenheimer attributed the Mac division's disappointing figures to constraints in the production chain of new iMacs. The company began and ended the quarter with between three and four weeks of Mac channel inventory, according to Oppenheimer, below Apple's target of four to five weeks of channel inventory.

Oppenheimer noted that market research firm IDC projected the PC market to have contracted six percent over the quarter, while Mac sales slowed by 16 percent.

Cook said there were three main factors that contributed to the decline in Mac sales performance: constraint of iMac supply; the loss of one week from the last year's 14-week first quarter; and channel inventory constraints that were down by over 100,000 units at the start of the quarter.

Commenting further on the issue, Cook reiterated the impact of iMac production issues, noting that "if you look at our portables alone, they were in line with IDC's projections of growth." Cook also pointed to the 23 million iPads Apple moved in the quarter, saying "we've always said there was some cannibalization, and I'm sure there was some cannibalization of Macs there."

But don't blame, just fix it. Tim doesn't strike me as a "roam the halls, threatening to fire" kind of guy, but he's also supposed to be the operations guy. Maybe they're being too kind? Who can say.

Agreed. I thought that this was Tim Cook's forte?! If they can't get their supply chain in gear, they should simply slow down product development. Better to meet demand with fewer new products than not meet it with a larger set.

Agreed. I thought that this was Tim Cook's forte?! If they can't get their supply chain in gear, they should simply slow down product development. Better to meet demand with fewer new products than not meet it with a larger set.

Execute, Tim.

If that is the case. If it's an issue specifically with new method for bonding the display and/or friction-stir welding then not updating the iMacs last year or doing just a spec bump wouldn't have impacted the other products.

Something else we need to consider are the long term uses for this new display and friction-stir welding. The iMacs probably can only sell a couple hundred thousand per month, at best, which makes it very low volume for an Apple product. Perhaps they choose the new iMac to help perfect the process for a high volume product for friction-stir welding (like the MBP or iPhone) or larger display product (like an Apple HDTV) for some future project. If either is the case then it makes sense to work this out with the iMac now.

If that is the case. If it's an issue specifically with new method for bonding the display and/ot friction-stir welding then not updating the iMacs last year or doing just a spec bump wouldn't have impacted the other products.

Maybe, maybe not - we don't know that. It could also be related to the new screen bonding method.

However, there's a more fundamental strategic error. They stopped shipping the old one a couple of months before the new one was available. There were certainly no production problems with the old version so there was no real reason to pull it off the shelves. Continuing to sell the old one until the new one was available would have had a significant impact.

I can't imagine a single reason why they stopped selling the old one as early as they did. In most cases, they even keep selling the previous model for a while after the new ones come out.

Maybe, maybe not - we don't know that. It could also be related to the new screen bonding method.

However, there's a more fundamental strategic error. They stopped shipping the old one a couple of months before the new one was available. There were certainly no production problems with the old version so there was no real reason to pull it off the shelves. Continuing to sell the old one until the new one was available would have had a significant impact.

I can't imagine a single reason why they stopped selling the old one as early as they did. In most cases, they even keep selling the previous model for a while after the new ones come out.

1) The bonding of the display was the first scenario I gave.

2) They did the same thing with the original iPhone, which isn't to say the reasons were the same. One possibility might have been to put those production lines into use with the new iMacs ASAP so they could ramp up faster knowing it was going to be a slow and arduous process to perfect. I assume they are well behind their plans for the new iMac but for all we know they are ahead of the proposed ramp up schedule.

3) Since I'm coming from a 2010 13" MBP with Core 2 Duo and dGPU I would have been perfectly fine with a 2011 27" iMac that had the SSD capability but it wasn't until last week that I first noticed the 27" back on their refurbished site.

But don't blame, just fix it. Tim doesn't strike me as a "roam the halls, threatening to fire" kind of guy, but he's also supposed to be the operations guy. Maybe they're being too kind? Who can say.

Quote:

Originally Posted by anantksundaram

Agreed. I thought that this was Tim Cook's forte?! If they can't get their supply chain in gear, they should simply slow down product development. Better to meet demand with fewer new products than not meet it with a larger set.

Execute, Tim.

Bear in mind that Apple is in hitherto unexplored territory. What company manufactures multiple products at such highly volumes? What company has introduced 3 products as challenging to produce as rMBP, iPhone 5 and the new emaciated iMac all in the same year, all of which to be manufactured in the millions and 10s of millions in each quarter? I am not mentioning the iPad because, presumably, neither iPad 4 nor Mini is much harder to make than iPad 3.

Thank goodness that it is the iMac they had trouble bringing off the assembly line and not the iPhone.

Regardless, we take Tim Cook and Apple for granted. But even if all the new products were not at all innovative, they have pulled off one hell of a year in manufacturing in 2012.